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Oil traded above $74 a barrel on concerns Hurricane Michael in the US
may exacerbate a supply crunch, while the International Energy Agency
(IEA) warned higher prices may put the world economy at risk.

Futures were little changed in New York after gaining 0.9% on
Tuesday. OPEC and other key producers need to
boost output as the oil market is entering a “red zone,” and high prices
are inflicting damage on the global economy, IEA Executive Director
Fatih Birol said in an interview. Adding to supply risks is
Hurricane Michael, which curtailed production in the Gulf of Mexico by
40% as it heads to Florida.

Still, the IEA’s comment suggests “prices are peaking at the most
opportunistic time given the waning global growth narrative.”

Crude has climbed more than 15% since mid-August as
uncertainties remain on whether the
Organisation of Petroleum Exporting Countries can replace shrinking
supplies from Venezuela to Iran. While Russian President Vladimir Putin
says impending US sanctions on the Persian Gulf state is to
blame for the gains, his American counterpart
Donald Trump has attacked OPEC for letting prices surge.

West Texas Intermediate for November delivery was at $74.82 a barrel
on the New York Mercantile Exchange at 08:55, down 14
cents. The contract rose 67c to $74.96 a barrel on Tuesday. Total
volume traded was about 23% below the
100-day average.

Brent for December settlement was 5c lower at $84.95 a barrel on
the London-based ICE Futures Europe exchange. The contract climbed 1.3% to $85 on Tuesday. The global benchmark crude traded at a $10.27
premium to WTI for the same month.

The IEA’s Birol said expensive energy has returned at a time when the
global economy is losing momentum. Still, while demand is strong, the
fourth quarter of the year will be challenging if there are no major
moves from the key oil producers. Emerging economies, most notably
India, are bearing the brunt of high energy prices, which comes when
they’re already contending with currency depreciation and the fallout
from trade disputes, he said.

In the US, Michael is set to make landfall in Florida on Wednesday,
with residents in the storm’s path urged to evacuate by Tuesday night.
Damages from the hurricane could reach as much as $15bn, depending
on its intensity after landfall and how quickly it moves through the
region, analysts said.

“Once the evacuation happens, it’s inevitable that oil production
comes to a halt and we should expect short-term gains in gasoline as
well as crude prices in the area,”
Kim Kwangrae, a commodities analyst at Samsung Futures, said by
phone. “However, we should wait and see how severe the hurricane gets to
have a better picture of its impact.”